First home buyer demand across New Zealand hits a record high

Despite reduced housing affordability and higher living costs, first home buyers (FHBs) in New Zealand are purchasing at a record rate.

According to CoreLogic NZ’s First Home Buyer Report, FHBs accounted for 27 per cent of purchases in the third quarter – a record high.

Over the year to date, FHBs sit at a 26 per cent market share, well above the long-term average of 21 per cent.

NZ Chief Property Economist Kelvin Davidson said despite some key challenges for all buyer groups, FHBs were still finding a way.

“Whether it’s using the low-deposit lending speed limits at the banks, tapping their KiwiSaver to help with their deposit, securing First Home Grants or First Home Loans, or compromising on the size or location of their home, FHBs are proving relatively more successful in buying their first home than at any other time,” Mr Davidson said.

The higher levels of FHB activity have been seen right across the main centres according to Mr Davidson.

Wider Wellington has held the strongest market share for FHBs with 33 per cent of purchases in the year to date (4 per cent above normal). 

At the other end of the spectrum, FHBs in Tauranga held 21 per cent of purchases (5 per cent above normal). Auckland, Christchurch, and Dunedin each report 5 per cent higher than average, with Hamilton 6 per cent above for 2023.

Provincial markets show a similar trend with Invercargill holding the strongest market share for FHBs with 32 per cent of purchases, a significant 10 percentage points higher than the long-term average. 

Source: CoreLogic NZ

FHBs have benefitted from the downturn in property values over the past 18 months, with the median price paid by the cohort falling from $720,000 in 2022 to $690,000 in 2023 to date.

Mr Davidson said the typical FHB entered the market above the ‘bottom rung’, rather than starting from the bottom.

“For example, $690,000 is lower than the median price paid across all buyers at $762,500, but it’s significantly higher than the lower quartile across all buyers at $565,000,” he said.

FHB’s in Australia are paying the most at $875,000, however, it is $107,000 less than the all-buyer median of $982,000. 

Median FHB prices paid range between $700-$750,000 in each of Tauranga, Wellington, and Hamilton, and sit at $600,000 in Christchurch, and $530,000 in Dunedin.

Standalone houses accounted for 71 per cent of FHB purchases nationally so far in the third quarter, which is on par with the 2022 figure, but less than the 75 per cent to 80 per cent share over 2019 and 2020. 

Flats have increased to 22 per cent of FHB purchases in the year to date, up from 21 per cent last year and 18 per cent across all buyers.

Across the main centres, standalone houses account for the highest shares of FHB purchases in Dunedin (89 per cent), Hamilton (88 per cent), and Tauranga (87 per cent). These figures for the year to date are close to their long-term averages.

Mr Davidson said purchases for houses in Auckland, Christchurch and Wellington over 2023 have been comparatively low compared to past norms. 

“Factors that likely contribute to this include better affordability and availability for smaller dwellings like townhouses or apartments in these main centres,” he said.

Across New Zealand’s main urban areas, FHB market share has remained strong in 2023.

Invercargill has had the highest market share for FHBs with 32 per cent of purchases in 2023 to date, a full 10 percentage points above the long-term average.

Whangarei, Rotorua, Napier, and Hastings each recorded at least 5 percentage points higher than normal.

In contrast, Queenstown has seen FHBs continue to struggle a little in 2023, with a market share of only 13 per cent, down from its long-term average of 15 per cent.

Mr Davidson said it’s been a strong market for FHBs, with many key factors still in their favour.

“It wouldn’t be a surprise to see FHBs continue to hold onto an above-average share of property purchases in the next six to nine months,” he said.

“After all, we do not expect runaway growth in house prices for the foreseeable future, especially if or when caps on debt-to-income ratios for mortgage lending come into force next year. 

“Affordability also remains a handbrake, as do high mortgage rates.”

He said with the change of government and the softening of the tax system for property investors, FHBs may find some competition going forward.

“To be fair, low rental yields and high mortgage rates, hence high ‘top ups’ from other income sources, could prevent a strong return from property investors,” he said.

“But this FHB Report probably still marks a line in the sand, and FHBs may start to see some competing buyers returning.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.